Intercompany journals involve balancing segment values that map to different legal entities. These journals are balanced for each legal entity by using their intercompany accounts. The Balancing API uses the intercompany accounts defined for the relevant effective date range. Since multiple accounts may be defined for the same date range, the Balancing API picks the accounts flagged with the Use for Balancing indicator. The offsetting debit for a legal entity goes into its intercompany receivables account. The offsetting credit goes into the legal entity's intercompany payables account.

Intercompany accounts may be defined at the legal entity level. That is, each transacting legal entity has different intercompany accounts defined for different trading partner legal entities, regardless of which specific balancing segment values of those legal entities are used in the journals. The transacting and trading partner balancing segment values are then not explicitly specified in the definition and are set to All.

Intercompany accounts may be defined at the balancing segment level of the legal entities. In other words, a transacting legal entity can use different accounts for different transacting balancing segment values, depending on what the trading partner legal entity and trading partner balancing segment value are. In that case, transacting or trading partner balancing segment values may be explicitly specified in the intercompany account definitions.

There are different types of intercompany journals. The Balancing API first determines the type of the intercompany journal (one-to-one, one-to-many, many-to-one, or many-to-many) with respect to the legal entities. For intercompany balancing there is no clearing company usage and all legal entities are balanced by summary net with respect to each other.

The following examples consider a one to one journal and how they are balanced.

Balancing segment value 10 maps to legal entity 1 (LE 1). Balancing segment value 20 maps to legal entity 2. The chart of accounts for this example has three segments: balancing, natural account, and Intercompany.

Legal entity 1 uses the corporate ledger and the corporate chart of accounts.

Legal entity 2 uses the corporate ledger and the corporate chart of accounts.

The Balancing API must balance the following journal:

The API determines that 10 and 20 belong to different legal entities. Because this journal has one debit legal entity (10) and one credit legal entity (20), it is a 1-1 journal. The API begins with the debit legal entity. The balanced journal is:

Intercompany accounts are defined to provide automated accounting between legal entities within the same company.

Before defining intercompany accounts, you need to choose a transacting legal entity (From legal entity) and a trading partner legal entity (To legal entity).